The government’s Ultra Fast Broadband or UFB tender is drawing to a close today. This new crucial network infrastructure build is attracting a great deal of attention from various industry players, despite some saying the project is underfunded compared to for instance Australia’s NBN. The government has multiple goals for the UFB, and one of them is to learn from and to avoid repeating past mistakes. That’s much harder than it seems, because technology and the way we use it can take unexpected turns. When Telecom was sold off, its main business was voice calling. That’s important enough, and the idea was that a privatised Telecom would have commercial incentives to provide voice services cheaper and more efficiently than a state-owned telco. Even though the Internet had been born already, nobody could see the packet-switched data-centric world of the 21st century coming. To state the obvious, in 2010, voice is no longer king when it comes to telecommunications, merely part of a service bundle. That’s how it should be if we had planned our telecommunications infrastructure to keep up with customer needs and technology. We didn’t do that, unfortunately. The reason is DSL, or broadband over copper phone lines. DSL is fantastic technology considering what it delivers but it failed the ISP industry and us, the customers, by not being open access. Instead, we got resold Bitstream DSL access in various formats, as delivered by Telecom. The incumbent is the infrastructure provider, the wholesaler and also, a retailer that competes against access seekers that resell Telecom services on thin margins. As a result of this direct control over the network Layer 2, the field of ISPs in New Zealand has thinned and with them, the service options available to customers. We’re talking about less competition, very similar product offerings and pricing; that’s not a sign of a healthy, dynamic growth industry. Local Loop Unbundling was introduced to deal with this issue, but it was too little and too late to make a big difference. This past experience is exactly the reason why there’s reason to be concerned when members of the New Zealand Regional Fibre Group or NZRFG propose to light up fibre and provide 100Mbit/s Ethernet or other Layer 2 connectivity directly to customers (Read more on network layers). The government appears to have issued a preference for the LFCs to stay at Layer 1, and to let access seekers light up the fibre themselves. However, the government has left the door open for LFCs to provide Layer 2 services directly to customers too, which some now say they will supply. Asked about its policy on Layer 2 services, NZRFG says “it supports the government objective of delivering open access wholesale infrastructure provided on equivalent terms to all Access Seekers.” Will the NZRFG however ensure that this happens? While the government says its Crown Fibre Holdings Company has a “particularly strong interest in ensuring there are low barriers to End Users switching retail service providers, where the services are provided on LFC networks,” this could be difficult to achieve in reality. In rural and provincial areas with low to medium numbers of customers, the first provider to get a foot in the door is likely to turn into a mini-monopoly. Customer inertia and economies of scale will see to that. There are many challenges before the UFB becomes reality, and one of them is not to turn it into another Bitstream-style network. If that happens, the billions of public funding will be wasted.
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